June 22, 2006

Arbitral Subpoena Is Struck.

The Second U.S. Circuit of Appeals analogized arbitral subpoenas to agency or administrative subpoenas, which are considered final, while ordinary civil and criminal subpoenas are not. It reversed a district court’s decision to force compliance with the subpoena. Dynegy Midstream Services LP v. Trammochem, 2006 WL 1612722 (2d Cir., June 13, 2006)(available at the Decisions link at http://www.ca2.uscourts.gov).

The unanimous panel found that it had jurisdiction to hear an appeal of the arbitral subpoena under Federal Arbitration Act Section 16, which grants appellate jurisdiction over "a final decision" arising from an arbitration. This is in line with the Seventh Circuit's decision in Amgen Inc. v. Kidney Ctr. of Del. County Ltd., 95 F.3d 562, 565-67 (1996).

The court, however, did not enforce the arbitral subpoena. It held instead that the district court lacked personal jurisdiction because FAA § 7 does not authorize nationwide service of process. Section 7 requires that an arbitral summons be served in the same manner as judicial summons; the section also provides that the district court in the district where the arbitrators sit may enforce such summons in the same manner as they would a judicial summons.

Because judicial service of process is not nationwide, the Second Circuit held that nationwide service is not explicitly authorized in the FAA. The court refused to infer such a grant from Congress, in spite of the fact that the holding means that the FAA "authorizes the issuance of some subpoenas that cannot be enforced."

‘Administrative Dismissal’ Is not a ‘Final Decision’ Required for Appellate Jurisdiction under the FAA.

In an order to compel arbitration, a U.S. District Court judge ordered the underlying claims before another judge of the same district to be stayed. The other judge complied, "administratively dismissing" the claims. The Fifth Circuit held that administrative dismissal does not qualify as a "final decision" under the FAA (see 9 U.S.C. §16(a)(3), (b)(1)), and therefore the Circuit court had not jurisdiction to consider an appeal of the order compelling arbitration. CitiFinancial Corp. v. Harrison, 2006 WL 1644828 (5th Cir., June 15, 2006)(available at http://www.ca5.uscourts.gov/opinions/pub/04/04-60979-CV0.wpd.pdf).

In Applying a New York Long-Arm Statute to Determine Jurisdiction, Courts Are Not Limited to Reviewing the Arbitrators’ Actions, But Also May Look to the Underlying Contractual Relationship.

The Second Circuit vacated a district court's dismissal of a petition to vacate an arbitral award for lack of personal jurisdiction. The court held that New York was not limited to examining the arbitrators’ actions in applying the factual analysis required by the long-arm statute, but also could look to the underlying contractual relationship. The court also held that the arbitrators' conclusion that no tort was committed was not binding on the district court in determining whether a tortuous act had occurred in New York, so as to confer jurisdiction. The circuit court remanded for further factual consideration. Sole Resort S.A. de C.V. v. Allure Resorts Management LLC, No. 05-5786-cv, 2006 WL 1612952 (2d Cir., June 13, 2006)(available at the Decisions link at http://www.ca2.uscourts.gov).

Where a collective bargaining agreement referred to, but did not define, "present practice," the arbitrator had to "look at extrinsic evidence to inform his interpretation . . . of past practice. . . ." The Eighth Circuit rejected claims that the arbitrator interpretation had nullified a collective bargaining contact provision–in an agreement between the Minneapolis Star Tribune and its workers--and held that the provision in question "cannot be considered in isolation” and “must be read in context of the entire agreement . . .," including references to "present practice." The panel upheld the union’s award. Star Tribune Co. v. Minnesota Newspaper Guild Typographical Union, No. 05-3955, 2006 WL 1585161 (8th Cir., June 12, 2006)(available at “All Opinions” link http://www.ca8.uscourts.gov.)

The Eighth Circuit held that a mandatory arbitration program implemented by distributing to employees a "Rules of Arbitration"--which states that "accepting or continuing employment" constituted the agreement’s acceptance–is a valid contract requiring arbitration. A unanimous panel rejected an employee's claim that refusal to sign an acknowledgment form was a valid rejection. The Court further held that in light of the preference for requiring arbitration, and since the agreement to arbitrate covered "any claim that could be made in a court of law," arbitration was required even for administrative claims that were pending before the implementation of the arbitration program. Berkley v. Dillard's Inc., 2006 WL 1626969 (8th Cir., June 14, 2006)(available at “All Opinions” link http://www.ca8.uscourts.gov.).